European Dividend Stocks to Buy: Telefonica (TEF)
Dividend Yield: 6%
And finally, we get to one of my favorite long-term holdings, Spanish telecom giant Telefonica (TEF).
Like Telenor, Telefonica is a classic “emerging markets lite” investment in that it is headquartered in a well-regulated European market yet gets the bulk of its revenues from emerging markets. About half of Telefonica’s operating profits come from Latin America. Telefonica also owns about 5% of China Unicom (CHU), China’s second-largest telecom operator.
The Spanish economy is showing signs of life and is expected to emerge from recession once the quarterly GDP data is released. Meanwhile, the sharp depreciation of Latin American currencies that has plagued all multinationals in the region over the past two years appears to have mostly run its course.
All of this bodes well for Telefonica’s business prospects going forward.
Telefonica also made news this week by announcing a partnership with Tesla Motors (TSLA) that will see Telefonica provide in-car wireless connectivity in the U.K., Germany, Netherlands and Spain. While I don’t see this as a major revenue booster, I like that Telefonica is looking beyond its traditional business lines for growth.
Telefonica reinstated its dividend last year and now yields an attractive 6% based on its two-part 2014 dividend. Over its history, Telefonica has been one of the most shareholder friendly companies in Europe, and I expect to see the company raise its dividend as economic conditions in its key markets improve.
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Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. As of this writing, he was long TEF. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays.